The art of the company profile
If you didn’t read Bloomberg Businessweek’s profile of Hewlett-Packard and CEO Meg Whitman last week, you should. It’s an interesting, well-written look at the company going through some troubles, and an excellent example of the profile.
Here’s an excerpt:
Things are challenging at HP — more, perhaps, than at any time in its history. Customers are buying less of two of HP’s most important products — PCs and printers — while the company has amassed debt and laid out billions on acquisitions that haven’t worked out. Wall Street analysts have kicked off the New Year by saying that Whitman ought to break up the company. Since August 2010 the company has lost 70 percent of its share price and close to $68 billion in value. Despite being a component of the Dow, HP currently is worth $29 billion, half a billion or so less than Carnival Cruise Lines (CCL), which has roughly one-ninth the revenue. “You just wonder how HP can possibly fall so far so fast,” says William George, a professor at Harvard Business School and board member of ExxonMobil (XOM), Goldman Sachs (GS), and the Mayo Clinic. “You look at HP’s share price and think, ‘Are you kidding me? That’s all it’s worth?’ ”
It’s true that HP has a collection of now commoditized businesses such as PCs, servers, and printers, and that its products look dated in some areas. But many of these businesses remain cash machines, with HP generating more than $12 billion in operating income a year. The disarray at the top of the org chart, though, has just been too much. “This is one of the great corporate destructions of all time,” says George. “They will continue drifting and disappointing their shareholders unless they’re ready to make some really hard decisions.”
Whitman says she’ll make them, but needs time to really change things. “Five years,” she says. “Some people don’t like that answer.”
The story then goes on to recount the previous leaders and their struggles to turn the company around. First, there was Carly Fiorina:
The roots of HP’s decline go back at least to the 1990s. Carly Fiorina, Mark Hurd’s predecessor and the first outsider hired for the CEO job, spent her tenure doing away with what she saw as stodgy management principles baked into HP’s DNA—such as an abhorrence of large-scale layoffs—that were slowing it down. In 1999, HP sold Agilent Technologies (A), the electronic instruments division closest to HP’s roots.
Fiorina’s board leaked information and she was responsible for several high-profile acquisitions, the articles says. Then came Hurd, who again tried to change the culture:
Any request for outside consultants had to pass Hurd’s desk. HP went from spending about $100 million a year on firms such as McKinsey and Bain & Co. to almost nothing. A yearly bonus system got broken up into quarters; employees who were used to sharing a bonus pool were now meticulously and frequently ranked and rewarded based on their achievements. Hurd called for the lowest 10 percent of performers to be fired each year. He also had all the company’s executives interviewed and then analyzed by Heidrick & Struggles (HSII), an executive recruiting and talent evaluation firm, and personally reviewed the assessments.
The story then goes on to chronicle new board members and Whitman’s time at the helm of the company. It’s well researched, thorough and interesting. But Businessweek also posted a sidebar with more details about Whitman and her thoughts on Windows 8. It also again calls her to task for some shortcomings.
“Listen, Windows 8 did not appear to grow the market,” Whitman says. “But we are in early days, and the magnitude of the user-interface change and features were substantial. We have to stick with this. I am a believer. We are going to continue to invest in this platform. Whenever you do something of this magnitude in this kind of environment, you have to stick with it.”
One thing HP has not stuck with is any kind of coherent smartphone strategy. Back before smartphones became the must-have gadgets, HP actually had a booming iPaq smartphone business and dominated the market. Since then, the company let its own devices languish, bought Palm to try and revive them, and then shut Palm down about 18 months later, following lackluster product sales. During our talk, Whitman reiterated her stance that HP has to have a smartphone—eventually.
Together the two stories outline some of the problems and issues HP continues to work through. It’s a must-read for anyone thinking of investing in the company or trying to better understand the technology landscape.
It’s also a fair and balanced piece of work.